EspañolOn August 4, the Cristina Kirchner administration announced the expansion of the Careful Prices program to include prepaid cell-phone plans. Beginning August 15, this government program will not only cover the price of food, beverages, building materials, and motorcycles, but also the National Prepaid Plan (PPN).
The PPN is set to cover all mobile phone companies that operate in Argentina, including Caro, Personal, Movistar, and Nextel. The price-control scheme will apply to all services provided by these companies, such as voice calls, SMS text messaging, MMS multimedia messaging, and mobile internet. In additionally, customers will still be able to choose a phone number to call free, and another for text messages.
This plan, introduced by Commerce Secretary Augusto Costa and Telecommunications Secretary Norberto Berner, aims to establish a reference rate for prices and create competition among the four cell phone companies that operate in Argentina.
“We will launch an alternative plan that will serve as a reference, so that Argentinean consumers can be informed of telephone costs and can choose and purchase a plan that best suits their needs,” said Berner.
He added that the government’s plan will be “significantly cheaper” than those offered today by companies. Prepaid cell-phone users will be able to “freely and without charge, switch to a national prepaid plan, while opting to maintain their phone number portability.”
Meanwhile, Commerce Secretary Costa said that “With more choice, consumers can make informed decisions, and that is an effective exercise of their rights.”
The government’s proposal will only apply to prepaid phone plans, which represents 70 percent of the total venue generated by mobile-phone companies in Argentina. The government seeks to “avoid the abuse that comes with offering multiple plans and lack of information regarding service fees,” according to a statement by the Palacio de Hacienda.
The Ministry of Economy will set the price of text messages at AR$0.74 (US$0.06) compared to Claro Argentina’s price of AR$0.99. The first 30 seconds of each call will be charged AR$1.47 (US$0.11), while the remainder of the call will be billed at the standard rate. Mobile internet use will be priced at AR$2.50 (US$0.20) per day, versus the AR$3 fee that Claro currently charges.
As for the expansion of the cell-phone industry in Argentina, Berner stated that mobile use has gone from 4.5 million people in 2003 to 63 million today. As a result, he says, cell phones have gone from “a service for the elite to one for all Argentineans,” who now enjoy almost “universal access.”
Berner added that he believes what is important now is for cell phone companies to continue investing in the country, but that this investment needs to be “better intended.” He also said this move by the Argentinean government to bring prepaid cell phones under the umbrella of Careful Prices is justified given the state’s role in regulating and controlling these markets.
Jose Luis Espert, an Argentinean economist, told the PanAm Post that he believes this policy will end up hurting the cell phone industry in Argentina. He says the most likely outcome will be the exact opposite of the what the government is suggesting.
“We have the oldest technology in Latin America in terms of mobile phones. No one can make cell phone calls anymore [given spotty signal, overloading, and interference], and this plan creates a disincentive for investment. Companies should be able to charge what they want.”
Espert added that, in his estimation, every time the Argentinean state intervenes in a particular industry, they destroy it: “This happened to the meat market, fruits, and vegetables. Today, there’s no more wheat and we’re without power and energy.”
The economist also points out that Argentina currently has the second highest inflation rate in the world. “They’re taking care of prices so they can be as high as possible,” he said jokingly.
Under the slogan “we’ll take care of our prices together,” the national government has forced businesses, distributors, and suppliers to maintain prices at rates determined by the state and their analysts.
According to the Careful Prices official website, “[these] are prices that ensure competitive conditions in the economy, protect the pocketbooks of Argentineans, and protects the right of consumers to make informed choices.”
At present, the program applies to supermarkets and convenience stores, construction materials, wholesalers and distributors, and even 23 different motorcycle models.
Despite the government’s desire to maintain stable prices, the inflation rate in the month of July in Argentina was 2.55 percent, according to data from the Price Index prepared by Congress. On an annual basis, the Cato Institute estimates 56 percent inflation in Argentina at this time.